The Delaware Supreme Court said on Friday that creditors are entitled to rely on formal loan documents authorized by secured lenders, even if there is a mistake in the documents, Reuters reported on Saturday. The court was responding to a question from a New York federal appeals court relating to a dispute between creditors of General Motors before its 2009 bankruptcy and its former lender, JPMorgan Chase & Co. The issue relates to GM's insolvency, in which its healthy assets were sold to the new General Motors Co, while the rest were liquidated for the benefit of unsecured creditors. GM's unsecured creditors' committee claimed that JPMorgan and other holders of a syndicated $1.5 billion term loan extinguished their lien on GM's assets, freeing up the assets to unsecured creditors. JPMorgan said neither it nor GM intended to nix the lien. "Parties in commerce are entitled to rely upon a filing authorized by a secured lender and assume that the secured lender intends the plain consequences of its filing," the court said in its opinion.
